Taussig Technologies Is Considering Two Potential Projects,X and Y

question 33

Multiple Choice

Taussig Technologies is considering two potential projects,X and Y.In assessing the projects' risks,the company estimated the beta of each project versus both the company's other assets and the stock market,and it also conducted thorough scenario and simulation analyses.This research produced the following data:
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Which of the following statements is CORRECT?

• A)Project X has more stand-alone risk than Project Y.
• B)Project X has more corporate (or within-firm) risk than Project Y.
• C)Project X has more market risk than Project Y.
• D)Project X has the same level of corporate risk as Project Y.
• E)Project X has the same market risk as Project Y since its cash flows are not correlated with the cash flows of existing projects.

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Definitions:

Units per Year

A measure of production output or activity volume, indicating the number of units produced or sold within a year.

ROI Computation

The calculation of Return on Investment, which measures the gain or loss generated on an investment relative to the amount of money invested.

Net Book Value

The value of an asset after accounting for depreciation or amortization found on a company's balance sheet.

Operating Expense

Expenses incurred from a company's operational activities, excluding cost of goods sold, such as selling, general, and administrative expenses.